G.R. NO.

L-30511 FEBRUARY 14, 1980

MANUEL M. SERRANO, PETITIONER,

VS.
CENTRAL BANK OF THE PHILIPPINES;
OVERSEAS BANK OF MANILA; RESPONDENTS.

Reported by: Frances Daniella N. Edma

Professor: Dean Rocky Villanueva

Parties

Manuel M. Serrano
Felixberto M. Serrano Concepcion Maneja

Central Bank of the

Philippines Overseas Bank of
Manila

Lawyer, law professor, land
and housing developer, agro-
industrialist, and the widely-
acknowledged epithet of “real
estate guru” of the Philippines.
Lawyer Manuel Serrano is the Founder of the
Chamber of Real Estate & Builders' Associations
(CREBA) which he established in 1973, and is currently
CREBA's Chairman of the Board. He is also the Founder
of the Subdivision Owners Association of the Philippines
(SOAP), now known as Social Housing Developers
Association (SHDA). He is also Chairman of the
Business Against Graft & Corruption (BAGCOR) ~ an
alliance of business organizations, firms and individuals
aiming to stamp out graft and corruption.
Manny Serrano holds a Master of Laws degree in
Business Law from New York University, was admitted
to the Philippine Bar at the early age of 23, and was
professor of Constitutional Law, Political Law,
Administrative Law and Public Corporation Law.
Felixberto M. Serrano was a Filipino
politician. Serrano was secretary of foreign
affairs under President Carlos P. Garcia from
1957 to 1961. He was the permanent
representative of the Philippines to the United
Nations from 1954-1957. He was also a
member of the Philippine Congress.
Facts:
In the year of 1966, Manuel Serrano and Concepcion Maneja
made a time deposit for one year with Overseas bank of
Manila for the amount of P150,000 & P200,000 with 6% and
6.5% interest, respectively.

Overseas Bank of
Manila
In 1968, Concepcion Maneja, married to Felixberto M.
Serrano, assigned and conveyed to petitioner Manuel M.
Serrano, her time deposit of P200,000.00 with Overseas
Bank of Manila.
Notwithstanding series of demands for encashment of the
aforementioned time deposits from the respondent Overseas
Bank of Manila, dating from December 6, 1967 up to March
4, 1968, not a single one of the time deposit certificates was
honored by respondent Overseas Bank of Manila.
Since 1965, the Overseas Bank of Manila, while operating, was
only on a limited degree of banking operations since the
Monetary Board decided in its Resolution No. 322, dated
March 12, 1965, to prohibit the Overseas Bank of Manila from
making new loans and investments in view of its chronic
reserve deficiencies against its deposit liabilities. This limited
operation of respondent Overseas Bank of Manila continued up
to 1968.
 Central Bank of Philippines (CBP) argued that; 1) it does
not have the duty to exercise a most rigid and stringent
supervision of banks; 2) it is not a guarantor of the permanent
solvency of any banking institution; that 3) there was no
constructive trust created in favor of Serrano and Maneja
when their time deposits were made in 1966 and 1967 with
respondent OBM as during that time such bank was not
insolvent and its operations as a banking institution was being
salvaged by the respondent CBP;
Consequently Serrano filed a petition for mandamus and
prohibition, with preliminary injunction against respondents.
Serrano argued that respondent Central Bank failed in its
duty to exercise strict supervision over respondent OBM to
protect depositors and the general public.
ISSUE:
Whether or not Central Bank is liable on the alleged failure of the
Overseas Bank of Manila to return the time deposits made by
petitioner and assigned to him, on the ground that respondent Central
Bank failed in its duty to exercise strict supervision over respondent
Overseas Bank of Manila to protect depositors and the general public.
RULING:
NO, in reality the nature of the claims and cases of the
petitioner are recovery of time deposits plus interest from
respondent Overseas Bank of Manila and recovery of damages
against respondent Central Bank for its alleged failure in the
performance of its duty to supervise all banks.
These claims of these nature according to the court, are
not proper in actions for mandamus and prohibition as there is
no shown clear abuse of discretion by the Central Bank but
instead it should be in Court of First Instance in an ordinary
action.
RULING:
Bank deposits are in the nature of irregular deposits. They are really
loans because they earn interest. All kinds of bank deposits, whether
fixed, savings, or current are to be treated as loans and are to be
covered by the law on loans.
Current and savings deposit are loans to a bank because it can
use the same. The petitioner in making time deposits that earn
interests with respondent Overseas Bank of Manila was in reality a
creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner.

C
R
E
D
I
T Overseas
O Central Bank of
the Philippines Bank of
Manuel Serrano R Manila
DEBTOR
Failure of the respondent Bank to honor the time deposit is
failure to pay of its obligation as a debtor and not a breach
of trust arising from depositary’s failure to return the
subject matter of the deposit.
WHEREFORE, the petition is dismissed for lack of merit.

BANK DEPOSIT

CREDITOR-DEBTOR DEPOSITARY-DEPOSITOR
DOCTRINE:

Art. 1980 of the Civil Code

Fixed, savings, and current deposits of money in banks
and similar institutions shall be governed by the provisions
concerning simple loan.
G.R. NO. 104612 MAY 10, 1994

BANK OF THE PHILIPPINE ISLANDS (SUCCESSOR-

IN- INTEREST OF COMMERCIAL AND TRUST CO.),
PETITIONER,
VS.
HON. COURT OF APPEALS, EASTERN PLYWOOD
CORP. AND BENIGNO D. LIM, RESPONDENTS
FACTS:
Private respondents Eastern Plywood Corporation and Benigno Lim as officer of
the corporation, had an “AND/OR” joint account with Commercial Bank and
Trust Co (CBTC), the predecessor-in-interest of petitioner Bank of the Philippine
Islands.
In 1975, Lim withdraw funds from such account and used it to open a joint
checking account (an “AND” account) with Mariano Velasco. When Velasco
died in 1977, said joint checking account had P662,522.87. By virtue of an
Indemnity Undertaking executed by Lim and as President and General Manager
of Eastern, he withdrew one half of this amount and deposited it to one of the
accounts of Eastern with CBTC.
 Eastern obtained a loan of P73,000.00 from CBTC which was
not secured. However, Eastern and Lim and CBTC executed a
Holdout Agreement providing that the loan was secured by the
“Holdout of the C/A No. 2310-001-42” referring to the joint checking
account of Velasco and Lim.
In the meantime, a case for the settlement of Velasco’s estate
was filed in the RTC of Pasig. The RTC granted the claim of the
estate from the and account of Lim and Velasco and allowed the heirs
to withdraw the amount of Php331,261.44. Holdout
Agreement
 When CBTC merged with BPI, the latter filed a complaint
against Lim and Eastern demanding the payment of the loan. BPI
asserted that the Holdout Agreement provides for the security of the
loan obtained by Eastern and that it is the duty of CBTC to debit
the account of respondents to set off the amount of P73,000
covered by the promissory note.
 Private respondents Lim and Eastern filed a counterclaim
against BPI for the return of the balance in the disputed account
subject of the holdout agreement; the balance of which and
account was permitted by BPI to be withdrawn by the heirs of
Velasco. Private respondents assert that the amount deposited in
the joint account of Velasco and Lim came from Eastern and
therefore rightfully belong to Eastern and/or Lim. Since the
Holdout Agreement covers the loan of P73,000, then petitioner
can only hold that amount against the joint checking account and
must return the rest.
ISSUE:
(1)Whether or not BPI can demand the payment of the loan
despite the existence of the Holdout Agreement
(2)Whether or not BPI is still liable to the private
respondents on the account subject of the withdrawal by
the heirs of Velasco.
 RULING:
Whether or not BPI can demand the payment of the
loan despite the existence of the Holdout Agreement.

YES, the Holdout Agreement conferred on CBTC the power, not the duty,
to set off the loan from the account subject of the Agreement. When BPI
demanded payment of the loan from Eastern, it exercised its right to
collect payment based on the promissory note, and disregarded its option
under the Holdout Agreement. Therefore, its demand was in the correct
order.
RULING:
Whether or not BPI is still liable to the private
respondents on the account subject of the
withdrawal by the heirs of Velasco.

YES, BPI was the debtor and Eastern was the creditor with respect to
the joint checking account. Therefore, BPI was obliged to return the
amount of the said account only to the creditor. When it allowed the
withdrawal of the balance of the account by the heirs of Velasco, it
made the payment to the wrong party. The law provides that payment
made by the debtor to the wrong party does not extinguish its obligation
to the creditor who is without fault or negligence. Therefore, BPI was
still liable to the true creditor, Eastern.
 RULING:
Whether or not BPI is still liable to the private
respondents on the account subject of the
withdrawal by the heirs of Velasco.

In Serrano v. Central Bank, bank deposits are in the nature of irregular deposits; they
are really loans because they earn interest. The relationship then between a depositor
and a bank is one of creditor and debtor.
The deposit under the questioned ―and account was an ordinary bank deposit;
hence, it was payable on demand of the depositor. The account was proven and
established to belong to Eastern even it was deposited in the names of Lim and
Velasco. As the real creditor of the BPI, Eastern had the right to withdraw it or to
demand payment thereof. BPI cannot be relieved of its duty to pay Eastern simply
because it already allowed the heirs of Velasco to withdraw the whole balance of the
account. The petitioner should have not allowed such withdrawal because it had
admitted in the holdout agreement the questioned ownership of the money deposited
in the account.
DOCTRINE:

Art. 1980 of the Civil Code

Fixed, savings, and current deposits of money in banks
and similar institutions shall be governed by the provisions
concerning simple loan.